The US dollar is sitting on the crucial 0.78 level against the Swiss franc, an area that remains important.
USD/CHF
The US dollar has fallen against the Swiss Franc during the trading session here on Friday as interest rates continue to drop. With that being the case, I think you have to look at this through the prism of the interest rate differential shrinking a bit, but at the end of the day I still think a lot of traders will be attracted to the interest rate differential that remains.
I also recognize that the Swiss National Bank is a major player in this scenario as they will get involved if the Swiss Franc strengthens too much. The temporary weakness of the US dollar, at least against the Swiss Franc, will change soon, and in that environment, I look to be a buyer.
Central Bank Intervention and Long-Term Carry Trade
You get paid at the end of every session to hang on to the US dollar and that of course is something that you need to keep in mind. There will be plenty of traders out there that are willing to hang on to a position for the long term and given enough time I do think you have a situation where the 0.78 level itself is also an area that you'll be watching as it is a large round psychologically significant figure and an area that we've seen both support and resistance previously.
Because of this, I believe that you have to look at this as a market that is more of an investment than anything else. If we were to break down from here, then the 0.77 level could be a support level as well.
If we can break above the 50-day EMA, then the market could go looking to the 0.80 level. In general, I think this is a buy on the dip scenario regardless of what it is that you're seeing on the chart in the short term because in the long term the Swiss Franc will be left behind as a safety currency and we will start to play the interest rate.